SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FAFCO, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ]
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule, or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
FAFCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 24, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FAFCO, Inc.,
a California corporation (the "Company"), will be held on Thursday, April 24,
1997 at 3:00 p.m., local time, at the Company's executive offices, 2690
Middlefield Road, Redwood City, California 94063 (telephone (415) 363-2690) for
the following purposes:
1. To elect three (3) directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the appointment of Burr, Pilger & Mayer as the independent auditors
of the Company for the fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Only shareholders of record at the close of business on March 19, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy.
Sincerely,
/s/Alex N.Watt
--------------
Alex N. Watt, Secretary
Redwood City, California
April 2, 1997
FAFCO, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of FAFCO, Inc. (the "Company") for use
at the Annual Meeting of Shareholders of the Company (the "Annual Meeting")
to be held on Thursday, April 24,
1997 at 3:00 p.m. local time, or at any adjournment thereof, for
the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at
the Company's principal executive offices, 2690 Middlefield Road,
Redwood City, California. Its telephone number at that address is
(415) 363-2690.
These proxy solicitation materials were mailed on or about April 2,
1997 to all shareholders entitled to vote at the meeting.
Record Date and Outstanding Shares
Shareholders of record at the close of business on March 19, 1997 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting.
At the Record Date, 3,298,311 shares of the Company's Common Stock, $0.125 par
value, were issued and outstanding. The only person known by the Company to be
the beneficial owner of more than 5% of the Company's Common Stock as of the
Record Date was Freeman A. Ford. See "ELECTION OF DIRECTORS - Security
Ownership."
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
Voting and Solicitation
Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected (three) multiplied by the number of shares held by
such shareholder, or distribute such number of votes on the same principle among
as many candidates as the shareholder thinks fit, provided that votes cannot be
cast for more than the number of directors to be elected. However, no
shareholder shall be entitled to cumulate votes for a candidate unless such
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting prior
to the voting of the intention to cumulate votes. On all other matters, each
share has one vote.
The cost of this solicitation will be borne by the Company. The Company will
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners in accordance with applicable regulations. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is a
majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but should not be counted as Votes
Cast with respect to a proposal since the shareholder has expressly declined
to vote on such proposal. Similarly, broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
Votes Cast with respect to a proposal on which the broker has expressly not
voted. Accordingly, abstentions and broker non-votes will not affect the
outcome of the voting on a proposal that requires a majority of the Votes Cast.
Shareholder Proposals
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's next Annual Meeting of Shareholders must be
received by the Company no later than December 3, 1997 in order to be considered
for possible inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
A Board of three directors is proposed to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's three nominees named below, all of whom are currently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting of
Shareholders, the proxies will be voted for any nominee who shall be designated
by the current Board of Directors to fill the vacancy. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner in accordance with
cumulative voting (if it is invoked) as will assure the election of as many of
the nominees listed below as possible, and, in such event, the specific nominees
to be voted for will be determined by the proxy holders. It is not expected
that any nominee will be unable or will decline to serve as a director. The
term of office of each person elected as a director will continue until the next
Annual Meeting of Shareholders or until his successor has been elected and
qualified.
The names of the nominees, and certain information about them, are set forth
below.
Name of Nominee Age Principal Occupation Director Since
- -------------------------------------------------------------------------
Freeman A. Ford 56 Chairman of the Board, 1972
President and Chief
Executive Officer of the
Company
William A. Berry 58 Senior Vice President and 1974
Chief Financial Officer of
the Electric Power Research
Institute, an energy industry
research consortium
Robert W. Selig, Jr. 57 President of Davis Instruments 1974
Corporation, a manufacturer and
distributor of marine and weather
equipment
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There is no
family relationship between any directors or executive officers of the Company.
Mr. Ford is also a director of H.B. Fuller Company.
Mr. Berry served as President of Optical Shields Ltd., a manufacturer of
products based on liquid crystals, from August 1990 until January 1992. In
January 1992, Mr. Berry resigned from Optical Shields Ltd. and became self-
employed as a management consultant. From April 1992 to May 1996, Mr. Berry
served as Senior Vice President and Chief Financial Officer of Compression Labs,
Inc., a supplier of video-conferencing equipment. In May 1996, Mr. Berry
joined the Electric Power Research Institute, an energy industry research
consortium, as Senior Vice President and Chief Financial Officer.
Mr. Selig has served as President of Davis Instruments Corp., a manufacturer
and distributor of marine and weather equipment, for more than the past five
years.
Recommendation
The Board of Directors recommends that shareholders vote FOR each of the
Company's nominees for director.
Vote Required
The three nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum, but have no other legal effect under California law.
Security Ownership
The following table sets forth the beneficial ownership of Common Stock of the
Company as of the Record Date of (1) each person known by the Company to
beneficially own more than 5% of the Company's Common Stock, (2) each director,
(3) the current and former executive officers of the Company named in the
Summary Compensation Table below (the "Named Executive Officers"), and (4)
all current directors and executive officers as a group:
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned
Number of
Name of Beneficial Owner Shares(1) Percent of Total
- ------------------------------ ------------ ----------------
<S> <C> <C>
Freeman A. Ford 2,178,846(2) 58.5%
c/o FAFCO, Inc.
2690 Middlefield Road
Redwood City, California 94063
Alex N. Watt 78,950(3) 2.4%
David K. Harris 60,334(4) 1.8%
Robert W. Selig, Jr. 47,528(5) 1.4%
William A. Berry 21,500(6) *
All current directors and executive 2,399,158(7) 62.0%
officers as a group
(6 persons)
</TABLE>
* Less than 1%.
(1) Except as otherwise indicated in the footnotes to this table or as otherwise
provided by community property laws, the beneficial owner has sole voting and
investment power with respect to all shares.
(2) Includes (i) 298,000 shares held of record by trusts for the benefit of Mr.
Ford's children for which he and his spouse serve as trustees and as to which
shares he disclaims beneficial ownership, (ii) 209,344 shares jointly owned by
Mr. Ford and his spouse, (iii) 61,250 shares issuable upon exercise of options
exercisable within 60 days of the Record Date, and (iv) 363,750 shares issuable
upon exercise of outstanding warrants exercisable within 60 days of the Record
Date.
(3) Includes (i) 58,764 shares issuable upon exercise of outstanding options
exercisable within 60 days of the Record Date held by Mr. Watt and (ii) 1,000
shares held by Mr. Watt and Sandra S. Watt as joint tenants.
(4) Includes 46,805 shares issuable upon exercise of outstanding options
exercisable within 60 days of the Record Date held by Mr. Harris.
(5) Includes (i) 14,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of the Record Date held by Mr. Selig, and (ii) 5,700
shares held by trusts for the benefit of Mr. Selig's children, as to which
shares he disclaims beneficial ownership.
(6) Includes 14,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of the Record Date held by Mr. Berry.
(7) Includes (i) 178,819 shares issuable upon exercise of outstanding options
exercisable within 60 days of the Record Date held by three executive officers
(one of whom is also a director), (ii) 26,000 shares issuable upon exercise of
outstanding options and warrants exercisable within 60 days of the Record Date
held by two outside directors, and (iii) 363,750 shares issuable upon exercise
of warrants held by a director who is also an executive officer.
By virtue of his position as Chairman of the Board, President and Chief
Executive Officer of the Company and his beneficial ownership of approximately
59% of the Company's Common Stock as of the Record Date, Freeman A. Ford may
be deemed to be a "parent" and/or "control person" of the Company within the
meaning of the rules and regulations promulgated under the Securities Act of
1933, as amended. Mr. Ford can elect a majority of the Board of Directors and
controls any shareholder vote that does not require a supermajority with
respect to which his shares are eligible to be voted.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of the copies of Forms 3, 4 and 5
received by the Company, or written representations from certain
reporting persons that no Forms 5 were required for such persons,
the Company believes that, during the fiscal year ended
December 31, 1996, all filing requirements under Section 16(a) of
the Securities Exchange Act applicable to its officers, directors
and 10% shareholders were complied with.
Board Meetings and Committees
The Board of Directors of the Company held a total of two meetings during the
year ended December 31, 1996 (the "Last Fiscal Year").
The Audit Committee of the Board of Directors, which currently consists of
outside directors Berry and Selig, held one meeting during the Last Fiscal
Year. This Committee recommends engagement of the Company's independent
accountants and is primarily responsible for approving the services performed
by the Company's independent accountants and for reviewing and evaluating the
Company's accounting principles and its system of internal accounting controls.
There is no compensation committee or nominating committee or any committee
performing those functions. During the Last Fiscal Year, no director attended
fewer than 75% of the aggregate of the meetings of the Board of Directors and
the committees on which such director served.
Executive Compensation
The following table sets forth certain information regarding compensation paid
by the Company for services rendered during the Last Fiscal Year to the Company
by the Chief Executive Officer and the other Named Executive Officers.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term All Other
Annual Compensation Compensation Compensation($)
Awards
Other Annual Securities
Name and Compensation Underlying
Principal Position Year Salary($) Bonus ($) ($)(2) Options (#)
<S> <C> <C> <C> <C> <C> <C>
Freeman A. Ford 1996 $105,805 $35,459 -- $57,250 $1,748(1)
Chairman of the 1995 115,211 0 -- 0 2,582(1)
Board, President 1994 115,126 0 -- 0 2,492(1)
and Chief Executive
Officer
Alex N. Watt, 1996 109,333 4,992 -- 47,950 2,405(1)
Vice President, 1995 106,047 0 -- 0 2,218(1)
Finance and 1994 104,007 0 -- 15,814 2,218(1)
Administration,
and Chief Financial
Officer
David K. Harris, 1996 114,392 5,193 -- 47,950 332(1)
Vice President 1995 107,207 0 -- 0 293(1)
Pool Products 1994 103,670 0 -- 3,135 270(1)
</TABLE>
_______________________
(1) Represents life insurance premiums paid by the Company on behalf of Messrs.
Ford, Watt and Harris.
(2) Under applicable SEC rules, perquisites are excluded if the aggregate value
is less than the lesser of $50,000 or 10% of the executive officer's salary
plus bonus.
The following table sets forth certain information regarding stock options
granted to the Named Executive Officers during the Last Fiscal Year.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Number of
Securities % of Total Options
Underlying Granted to
Options Emplyees in Fiscal Exercise Price
Name Granted(#) Year ($S/h)(2) Expiration Date
- --------------- ----------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Freeman A. Ford 57,250(1) 24.2% $0.125 4/30/02
Alex N. Watt 47,950(1) 20.2% 0.125 4/30/02
David K. Harris 47,950(1) 20.2% 0.125 4/29/02
________________________
(1) Incentive stock option granted pursuant to the Company's 1991 Stock Option
Plan. Option has a ten-year term. Option was immediately exercisable as to
all but 20,000 of the underlying shares on the date of grant. The option
becomes exercisable as to 20% of the remaining shares on each anniversary of
the date of grant.
(2) All options in the table have exercise prices equal to the fair market value
of the Common Stock on the date of grant, based on the last available bid price
in the over-the-counter market on such date, which price the Board of Directors
has determined to be the fair market value of the Company=s Common Stock on said
date.
The following table sets forth information regarding the value of all
unexercised stock options and warrants held by the Named Executive Officers as
of the end of the Last Fiscal Year. No options were exercised by any Named
Executive Officer during the last Fiscal Year.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option and Warrant Values
</TABLE>
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/Warrants at Options/Warrants at
Fiscal Year-End(#) Fiscal Year-End($)(1)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
- ---------------- --------------- -------------- -------------- -------------
<S> <C> <S> <C> <C>
Freeman A. Ford 0 N/A 425,000/21,000 $0/0
Alex N. Watt 0 N/A 67,764/21,000 0/0
David K. Harris 0 N/A 46,085/30,000 0/0
</TABLE>
________________________
(1) Based on the last reported sale price for the Company's Common Stock for the
last trading day prior to 1996 fiscal year-end ($0.125), minus the exercise
price of the option or warrant.
Director Compensation
Directors who are not employees of the Company are entitled to receive
directors' fees in the amount of $750 for each board meeting attended and $750
for each committee meeting attended, provided that such committee meeting is
held on a different day than that of the board meeting. Directors who are not
employees of the Company are also entitled to an annual retainer of $1,250.
The Board of Directors has adopted and the shareholders of the Company have
approved the 1991 Directors' Stock Option Plan (the "Directors' Plan") pursuant
to which each non-employee director of the Company is automatically granted a
nonstatutory stock option to purchase 10,000 shares (a "Director's Option") on
the later to occur of the date of adoption of the Plan (April 15, 1991) or the
date of his or her appointment or election to the Board. Each Director's Option
has a term of ten years and becomes exercisable as to 20% of the shares subject
thereto on each anniversary date of its grant. Messrs. Berry and Selig were
each granted a Director's Option on April 15, 1991. Such options have an
exercise price per share of $0.50.
In addition, in April 1993, Messrs. Berry and Selig were each granted options
to purchase 5,000 shares of Common Stock at an exercise price of $0.50 per
share. Such warrants become exercisable as to 20% of the shares on the first
second, third, fourth and fifth anniversaries of date of grant.
Certain Transactions
In February 1996, the Company issued to Mr. Ford a subordinated promissory note
with a principal amount of $350,000, in consideration for cancellation of
certain outstanding indebtedness of the Company to Mr. Ford and an additional
cash payment by Mr. Ford. The Company also issued additional promissory notes
with aggregate principal amounts of $150,000 to five members of Mr. Ford's
immediate family. Each of the promissory notes bears an interest rate of 12%
per annum and is payable on demand. The Company also issued a warrant to
purchase 210,000 shares of Common Stock to Mr. Ford, and warrants to purchase up
to an aggregate of 90,000 shares of Common Stock to members of Mr. Ford's
family. Such warrants were immediately exercisable as to 20% of the underlying
shares, and become exercisable as to an additional 20% of the underlying shares
on each of the first, second, third and fourth anniversaries of the date of
issuance of such warrants. The warrants are exercisable at a price of $0.125
per share, and expire on March 27, 2000.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On December 11, 1996, the Company dismissed Price Waterhouse LLP as its
independent accountants. The reports of Price Waterhouse LLP on the financial
statements of the Company for 1994 and 1995 contain no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with its audits for the
1994 and 1995 and service as outside accountants through December 11, 1996,
there have been no disagreements with PriceWaterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Price Waterhouse LLP would have caused them to make reference
thereto in their report on the financial statements for such years. During
1994, 1995 and 1996 (through December 11, 1996) there were no "reportable
events" within the meaning of applicable SEC rules. The Company's Audit
Committee and Board of Directors participated in and approved the decision to
change independent accountants.
The Board of Directors has selected Burr, Pilger & Mayer, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
December 31, 1997. Burr, Pilger & Mayer audited the Company's financial
statements for the Last Fiscal Year. If the shareholders do not ratify the
appointment of Burr, Pilger & Mayer, the selection of independent auditors
will be reconsidered by the Board of Directors. Representatives of Burr,
Pilger & Mayer are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
The Board of Directors has unanimously approved the appointment of Burr, Pilger
& Mayer as the Company's auditors for fiscal 1997 and recommends that the
shareholders vote "FOR" this proposal.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 2, 1997
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
___________________________________________________________
FAFCO, INC.
Proxy for 1997 Annual Meeting of Shareholders
April 24, 1997
The undersigned shareholder of FAFCO, Inc. (the "Company") hereby acknowledges
receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement for
the 1997 Annual Meeting of Shareholders of the Company to be held on April 24,
1997 at 3:00 p.m., local time, at the Company's principal place of business,
2690 Middlefield Road, Redwood City, California 94063 (telephone
(415) 363-2690), and hereby revokes all previous proxies and appoints Freeman A.
Ford and Alex N. Watt, or either of them, with full power of substitution,
Proxies and Attorneys-in-Fact, on behalf and in the name of the undersigned, to
vote and otherwise represent all of the shares registered in the name of the
undersigned at said Annual Meeting, or any adjournment thereof, with the same
effect as if the undersigned were present and voting such shares, on the matters
and in the manner specified on the reverse side:
(Continued and to be signed on reverse side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE FOLLOWING PERSONS AND PROPOSALS, AND
FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE
PROXYHOLDERS DEEM ADVISABLE.
1. Election of Directors
Nominees: FREEMAN A. FORD, WILLIAM A. BERRY, ROBERT W. SELIG, JR.
___FOR ___AUTHORITY TO VOTE WITHHELD
___For all nominees except as noted above.
2. Proposal to ratify the appointment of Burr, Pilger & Mayer as the independent
auditors of the Company for the fiscal year ending December 31, 1997.
___FOR ___AGAINST ___ABSTAIN
In their discretion, the Proxies are entitled to vote upon such other matters
as may properly come before the meeting or any adjournments thereof.
Dated_______________________, 1997
Signature:___________________________
Signature:___________________________
I Plan to attend the meeting: ___
(This proxy should be marked, dated and signed by each shareholder exactly
as such shareholder's name appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a fiduciary capacity should so indicate.
A corporation is requested to sign its name by its President or other
authorized officer, with the office held designated. If shares are held by
joint tenants or as community property, both holders should sign.)
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND
DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
